Paddy's "Letter from London"

Tuesday, June 21, 2011

Are we are losing the skills of reasoned debate?

Politics has always been powered by invective and the trading of abuse that is Prime Minister’s Questions and the taunting and insulting that is the daily fare of politicking today is nothing new. As Harry Truman famously put it “If you don't like the heat, get out of the kitchen." But what is new is the fact that the online world and particularly social networking sites like Facebook and Twitter offer instantaneous and ubiquitous communications and, to some extent, debate.

In this new world it seems to me that there is a real danger that reasoned debate is reduced to soundbites and things are said , and said in a way, that would be unthinkable in a more personal forum. To illustrate that let me take a recent article available online by a columnist in The Spectator Hugo Rifkind (pictured). The article has a headline “Ed Miliband was always destined to be rubbish – and he is”. Its a long time since I was in a Primary School playground but this headline comes close to being in the same category of insult that I recall 8-year-olds using. To support the “rubbish” charge Rifkind, who is not a comedian, chooses to quote a “joke” from someone who is - the Scottish comic Fred Macaulay. According to Macaulay the Leader of the Opposition “talks like he's got another mouth inside his mouth. which is trying to say something else”.

Whether you like Fred Macaulay’s joke or not it was just that – an attempt at humour. It is not about politics or policy or performance but, at a trivial level, about presentation. Rifkind jumps at the chance to make mischief. Miliband is “like the alien in Alien”. He “sounds a mess and is a mess”. And so on. And Mr Miliband’s colleagues on the opposition front bench get it in the neck as well. They, says our Sage, have the “air of the human dregs at the very end of a drunken wedding” they are “shouting old wrecks who don't remember where they live”

Mr Rifkind then refers to the “Miliband family drama” and suggests that other leading couples in the Labour Party (such as Ed Balls and his wife Yvette Cooper) will have “conflicts in the future”. This charge is without any justification and is just gratuitous name calling.

Much of the rest of the article is anti Labour bile, with a bit of anti Tory bile as well - perhaps for “balance”. Maybe the author was having a bad day – it is certainly a very bad article. Because to use a phrase like “Labour isn't just in trouble because Ed Miliband is rubbish” is unilluminating. And I haven't quoted selectively – in quite a long piece there is nothing at all of substance. Labour has the “wrong people” because the “right people were scared off”. Who these wrong and right people are Mr Rifkind doesn't enlighten us.

It is naive to think that presentation isn't important in politics. The most successful politicians of modern times – Blair, Clinton, Obama, Salmond for example are masters of effective communication. And David Cameron is very good as well. Ed Miliband, a fundamentally decent, intelligent and talented man has work to do in this regard. But he isn’t “rubbish”, or an “alien”, or a “mess”. And his colleagues are not “human dregs” or “old wrecks”. You may not agree with their polices and you may not like them personally. But politics is, or should be, an honourable profession and I do not for one minute doubt that both front benches are comprised of honourable men and women. Let them disagree and let the commentariat hold them to account. But trivial, pointed over-personalised abuse takes us to a very dark place - and attempts at humour (if that is what this article was in part) are best left to the real comedians.

Tuesday, June 14, 2011

Wonga – the modern day loan sharks

It’s late at night. You’ve parked your car a bit further away from the Cinema than ideally you would have liked and it didn’t look to be as secure a car park as you are used to. But you expect that it will be alright – an expectation that is swiftly disabused as you approach the area where your car is and you spot a seriously threatening bunch of young men around it. This looks like trouble – and it is. There isn’t much wriggle room – the power is all on one side, and it isn’t yours! Your choices are limited and for once your mind takes over. You know that you have only one desirable outcome – to get the hell away with your life, your health and your car intact. It’ll cost you and what was ten dollars for three hours parking swiftly becomes a hundred. Cash. Used notes. Handed over to the boss of the gang who graciously moves aside, wishes you well and points your route back to the highway. Extortion? Of course it was. And did you have a choice? Nah!

And that, in essence is the offer from Wonga.com. They will loan you money to tide you over when your cash flow is weak. Your payday is a week or so away and you haven’t the readies to pay the bills. The rent collector is at the door. The cupboard is bare. And the horse at Chepstow is still running! You don’t get the credit cards any more – not after that unfortunate County Court Judgment. You’ve got a job alright – at minimum wage - but outgoings, what with the young kid and the Partner’s mother’s problems don’t match to income. And that’s where the nice people at Wonga come in. They are the lender of last resort – well almost the last. There aren’t dudes in sharp suits and shades coming menacingly around every week to collect the repayment of your loan as once was the only option. No these Wonga guys work only online and it really is dead, dead easy to borrow. To get £100 to tide you over for a couple of weeks costs you a bit – you repay them £121.11 at the end of the fifteen days in that oh so brief period after you are paid when you’ve actually got some money coming in. So for every day that your £100 loan is in place you pay Wonga £1.40 – which means on an annual basis you’d pay £511 for that £100 loan. Loan £100. Interest £411. Interest rate a wee bit over 4000%!

But Wonga say their customers don’t keep their loans for a year or anything like that period. But that doesn’t mean that the interest rate is any different. They charge over 4000% whether you borrow for 24 hours or 24 days – or longer. The Wonga business model isn’t that interested in the individual – actually they don’t care at all. They know that to con one punter into paying £21.11 to borrow £100 for fifteen days is no big deal. It even, put like that, doesn’t sound too extortionate. But multiply that one punter by thousands and what you have is an institutionalised and highly profitable con trick. The interest rate applies to all – which means that the income stream accrues nice and reliably. Challenge anyone to borrow at say 3% (a couple per cent over bank rate) and loan at 4000% and they will make money – lots of it! The boss of Wonga, Errol Damelin, says that he is “debt averse” – that he finances his operation from equity and profits. Well no surprise there - obviously. The cash flow of the Wonga business is so extraordinary that there can be no need to borrow. But any accountant will tell you that the real value of the cash they loan is roughly equivalent to Bank Rate plus a small premium. 3% at most!

So just like the crooks demanding money from you to let you repossess your car Wonga preys upon the vulnerable that have no choice. Credit Cards today charge you around 17% – a bit more if they perceive you as a risk. Wonga charges you an interest rate that is around 250 times that rate. And the law allows them to do it! The modern day loan shark doesn’t work wearing dark glasses and with some heavies to threaten you on the doorstep. But they are no less venal and our society is much the poorer that it allows the like of Wonga.com to exist.

Saturday, June 11, 2011

How I helped Sir Brian Souter and Stagecoach!

I have a confession to make and I’m not sure that my progressive friends will forgive me. Today we learn that the controversial Scottish Nationalist Brian Souter, founder with his sister Ann Gloag of the bus and train giant Stagecoach, is to be knighted. These two are among the richest people in Scotland – and I have to admit that I played a part in getting them there! Here’s the story.

Back in the mid-1980s I was the Commercial manager for the oil company Shell in Scotland. My job was to manage Shell’s business with a wide range of industrial and commercial customers and I had a team of sales representatives and other staff focused on this task. It was in some ways a difficult time for business north of the border. Mrs Thatcher’s rule hit particularly hard on the Scots and many Scottish businesses, including some quite famous ones, went under. Various grades of fuel were crucial to keep the wheels of industry turning and my job was heavily involved in making judgment calls as to whether we should trade with businesses in financial difficulties. Few, even the largest, were immune from the troubles and the miners’ strike in 1984/5 brought particular problems across the whole business sector.

It was at this time that my Representative for the Dundee area came to see me with a ticklish problem. He was a good salesman and he had built up a good working relationship with a business which was growing quite rapidly and which was run by two clever and entrepreneurial young Scots - Souter and Gloag! Stagecoach in those days was a small Bus and Coach Company operating mainly in Scotland but hoping to benefit from the Conservative Government’s privatisation of the public transportation sector. Scheduled bus businesses in Scotland and the rest of the UK had been mainly publicly owned – often by local authorities. Stagecoach was predicated on the premise that this would change and that private companies, like theirs, would soon have the chance to get a share of the cake – if not all of it!

My Rep had done a good job in gaining a large share of Stagecoach’s business – including the crucial Shell credit card which the bus drivers used to buy fuel on long journeys when they were away from their home base in Dundee. For Shell it was good business. On the road sales gave a margin premium over bulk sales – but it was potentially a bit dodgy if transport operators got into financial difficulties, which they often did. Bad debts could build up rapidly if credit card use was uncontrolled. My reps story was as follows. Stagecoach had over-stretched itself. They had a lot of debt needed for financing their vehicles and high outgoings on fuel, leasing and staff costs. It was a well-managed business but in difficult times their ambitions were outstripping their capability to fund what they wanted. In short they were in a classic cash flow bind.The banks were being unhelpful and the company was seeking extended credit to keep afloat. I went with my rep to see Souter and Gloag and was impressed by their vision and by the fact that much of their business, in good times, was a cash business. Millions of low value transactions every day kept the money rolling in – but it just wasn’t enough at a time when the Bank rate was 12% and financing was really problematic. I had basically two choices. I could withdraw credit and ask for cash settlement for all transactions – that would almost certainly have forced the company into liquidation as fuel was such a high percentage of their outgoings. Or I could extend credit and be flexible over payments. I took the decision to support the company although it was quite a risk – the monthly outgoings were of the order of £100,000 and even more than that could have been at risk in the event of a default. However Stagecoach’s business model seemed robust and there was no doubting the energy and ambition of their two owners.

Well the rest, as they say, is history. My rep and I kept a close eye on Stagecoach for the next year or so but gradually their financial position improved and before I left Scotland in 1986 they were paying on normal terms – and their business continued to grow. Had they gone under in 1984 perhaps they would have re-appeared later in a different guise. Who knows? But many other Scottish businesses did perish and it was a long time before there was a truly healthy economic climate in the country. Souter and Gloag worked immensely hard to build their business and, in retrospect, I’m glad that I took the decision I did to keep them afloat. They were a significant employer in Dundee and across Scotland and that was another reason why it seemed at the time the right thing to do.

So Sir Brian I wish you well! I wonder if you remember the story I have told here. And whether you would acknowledge that a Sassenach from an Anglo-Dutch multinational played a wee part in your success!